Technology War Keeps Escalating, Huawei Faces Investigation for Violation of US Sanctions

After ZTE, another Chinese tech giant Huawei is likely to be the next prohibited target if the U.S. Department of Justice confirms its violations of sanctions against Iran.

U.S. Finds a Better Way to Win the Trade War

In last week, U.S. banned American companies from selling to Chinese telecom company ZTE Corp for seven years, for its illegal shipment to Iran and repeated false statements — a move to cut off ZTE’s supply chain. The trade war between US and China has intentionally shifted to a technology war, and seems more effectual than increasing tariffs on Chinese goods.

Huawei is one of the largest telecom equipment & smartphone manufacturers in the world and the major purchaser of U.S. chips. The investigation, is reported to probe whether Huawei Technologies Co. violated U.S. sanctions related to Iran, according to the Wall Street Journal.

Huawei has denied the allegation in the statement:” Huawei complies with all applicable laws and regulatory requirements of the countries in which it conducts business, including the applicable United Nations, United States, and European Union laws and regulations on export controls and sanctions.”

The Vulnerable Chinese Technology Industry

The sanction has severely hit ZTE, following by Huawei, Chinese technology industry is collapsing.

In fact, this is not the first time that Huawei be involved in the scrutiny. In 2016, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) issued a subpoena for information regarding Huawei’s exports and re-exports of U.S. technology over the last 5 years to Cuba, Iran, North Korea, Sudan, and Syria, which are designated as international terrorism supporters.

If found guilty in the new investigation, Huawei needs to pay for $6 billion civil and criminal penalties, and may lead to the complete ban on American technologies.

Similar with ZTE, most of Huawei-made telecom products rely on U.S. technologies, a ban on the key components would be fatal for the company and China economy.

The different thing is, U.S. is so far not the desired market of Huawei. After its latest product Mate 10 Pro was failed to arrive U.S. under the political pressure, Huawei has decided to quit U.S. market.

Chinese local media revealed that Huawei has accelerated chip innovation pace since 2012, Mr. Ren, the founder of Huawei has made a $400 million plan to support self-developed smartphone chips. The Kirin, Huawei’s self-developed chipset, is expected to replace U.S. imports and empower other Huawei products.

Once again, China tastes the bitterness of the over-reliance on foreign core technologies. We saw the government’s ambitions in ‘Made-in-China’ 2025 plan, but we need more practical solutions in the 7 years before the deadline comes.

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